Presently, all qualified defined contribution plans, as well as traditional IRAs, 403(a) or 403(b) annuity plans, and 457(b) government plans, must satisfy a minimum distribution requirement in which distribution of an employee's interest in the plan must begin by April 1st of the calendar year following the later of (1) the calendar year in which the participant attains age 70 1/2 or (2) the calendar year in which the employee retires.
This is a reasonable plan for normal situations.
However, for retirement plans that have accumulated very large amounts of retirement assets, I think it is unreasonable, and even borders on being obscene, from a tax advantage standpoint.
And particularly when the country has a US Debt in excess of $16 trillion, with large continuing annual US Deficits projected here on end, it is particularly unreasonable to permit very large retirement assets to continue to grow tax free and not have any distributed for an unreasonable additional period of time.
Thus, below here are my recommendations related to this issue.
For all retirement plans where the fair market value of the participant's interest in all plans exceed $50 mil on December 31 of the year the participant attains age 64 1/2, the minimum distribution requirement must start by April 1st in the calendar year the participant attains the age of 65 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans exceed $10 mil on December 31 of the year the participant attains age 65 1/2, but did not exceed $50 mil on December 31 of the year the participant attained age 64 1/2, the
minimum
distribution requirement must start by April 1st in the calendar year
the participant attains the age of 66 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans exceed $5 mil, but are less than $10 mil, on December 31 of the year the participant attains age 65 1/2, the minimum
distribution requirement must start by April 1st in the calendar year
the participant attains the age of 67 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans exceed $3 mil, but are less than $5 mil, on December 31 of the year the participant attains age 65 1/2, the minimum
distribution requirement must start on April 1st in the calendar year
the participant attains the age of 68 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans exceed $2 mil, but are less than $3
mil, on December 31 of the year the participant attains age 65 1/2, the
minimum
distribution requirement must start on April 1st in the calendar year
the participant attains the age of 69 1/2.
And for all of the above situations, and also for all situations where the total assets in the qualified retirement plans exceed $1 mil on December 31 of the year that the participant attains the age 65 1/2, my recommendation is to eliminate the second option, which permits the deferral of the minimum distribution requirement date due to the participant not being retired yet.
The economic harm to elderly US citizens of all of the above recommendations is substantially softened, since what is happening, for the most part, is simply paying US federal income taxes a bit earlier on income already earned, not paying more US federal income taxes in total.
All of the money raised here by the US Government as scored by the CBO over the next 10 years will be very substantial. And the amount raised over the second 10 years will be substantially higher. And thereafter, the money raised will continue to grow by leaps and bounds. All of this money raised should be used to reduce the US Debt.
